Valuation of physician's samples must follow the 01.07.2002 cost-based circular, not the later captive-consumption methodology.

Physician's samples were to be valued at 115% of the actual cost of production under the Board circular dated 01.07.2002, which governed valuation on a cost-of-production basis. The later circular dated 13.02.2003, directed to captively consumed goods, was held inapplicable to physician's samples for the period in dispute. The assessable value therefore had to be worked out by reference to the actual cost incurred in manufacture, and any remand was confined to recalculating the refund claim on that basis. The questions of law were answered in favour of the assessee.

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Issues: Whether physician's samples were required to be valued at 115% of the actual cost of production under the Board circular of 01.07.2002, and whether the later circular and CAS-4 methodology could be applied to the period in dispute.

Analysis: The assessable value of physician's samples was accepted by both sides to be 115% of the cost of production. That principle flowed from the Board circular dated 01.07.2002, which governed valuation on the basis of cost of production. The later circular dated 13.02.2003 was directed to captively consumed goods and was not the proper basis for valuing physician's samples. The cost had to be the actual cost incurred by the assessee in manufacturing the final product, and the remand could only be for working out the refund claim on that basis.

Conclusion: The later circular could not be applied to the valuation of physician's samples for the period in question. The assessable value had to be determined in terms of the 01.07.2002 circular at 115% of actual cost of production, and the questions of law were answered in favour of the assessee.

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